Question

Swift Company paid $11,600 in advance for six months of rent. What journal entry will Swift prepare to record this transaction?

Answer 1

The journal entry that Swift Company will prepare to record the transaction of paying $11,600 in advance for six months of rent is to debit Prepaid Rent for $11,600 and credit Cash for $11,600.

Step-by-step explanation:

The journal entry that Swift Company will prepare to record the transaction of paying $11,600 in advance for six months of rent is as follows:

1. Debit Prepaid Rent for $11,600
2. Credit Cash for $11,600

This journal entry follows the accounting principle of matching expenses with revenues. By debiting Prepaid Rent, an asset account, the expense is recorded while the cash payment is credited. This indicates that the rent expense is paid in advance and will be recognized over the six-month period as the rent is used.